'The people and the political class are at one: neither wants to face the future'

The election has resolved nothing. Britain continues to drift, its meandering course guided by the conventional wisdom of a generation ago. Crucial questions of national policy were fudged or deferred, so that when the government does find itself forced to take decisions on them, it will do so without the benefit of forethought or serious public debate. One reason for the palpable public boredom that accompanied most of the campaign was that it was largely fought around pseudo-issues. All the parties studiously avoided talking about the realities that will shape our lives over the coming years.

Within a decade or so, maybe sooner, a combination of accelerating climate change and the peaking of global oil supplies will put great strain on our present energy-intensive way of life, but the political class has decided to postpone thinking about the environmental crisis. The war in Iraq grinds on with Britain a hapless accomplice in the Bush administration's bungling and barbarism, and yet none of the parties asked whether the so-called special relationship with the US continues to serve the British national interest. Despite recent signs of slowdown, the domestic economy goes on producing jobs and rising incomes for the majority, but this prosperity is heavily dependent on unsustainable household borrowing. Sooner or later the debt binge will be followed by a hangover - an uncomfortable prospect that no one cares to think about.

Indeed, reality was hardly allowed to obtrude on the campaign at all. Debate was locked into the tired slogans of the 1990s, if not the 1980s. More than a quarter of a century after she came to power, British public discourse continues to be shaped by Margaret Thatcher, and her message of free markets and consumer choice is still the only story in British politics. In different ways all the major parties lay claim to her inheritance, and none has dared ask if the simple nostrums she propagated a generation ago contain answers to the problems we face today. The juggernaut of marketisation rolls on, flattening everything in its way. Oxford University looks poised to follow the BBC in reshaping itself on a dated model of the business corporation. The few remaining self-governing institutions seem bent on self-destruction.

A peculiar kind of market corporatism is entrenched throughout British life, and the autonomous institutions of which we could once be justly proud are now barely a memory. More crudely and mechanically than in Thatcher's time, public policy is ruled by the belief that if market mechanisms are the most efficient way of organising the economy, then they must be injected into every last corner of social life.

The idea that markets work best when they are complemented by institutions run on non-market principles used to be part of the country's tacit constitution, but it is evidently too subtle for the British today. At the same time, the discrepancy between the rhetoric of market choice and everyday experience becomes ever greater. We are all familiar with the chaos of the railways and the postal service, the deformation of education by incessant monitoring, and the absurdities that go with targeting in healthcare. British public institutions are now deeply dysfunctional, and yet all the major parties remain wedded to the neo-Thatcherite programme that has brought about this state of affairs.

As a by-product of this neo-Thatcherite consensus, British politics is dominated by what Freud called "the narcissism of minor differences". The gap between Labour and the Tories on acceptable levels of taxation and public spending is insignificant, and even on the toxic issues of Europe and immigration their positions are not as far apart as they pretend. Among the major parties, only the Liberal Democrats have maintained a principled stance on the Iraq war, and Charles Kennedy deserves great credit for stating that he favours an early withdrawal of British forces. On this ground alone, the Liberal Democrats deserved the vote of anyone who cared about honesty or simple decency in politics. Yet even they did not make clear the revolutionary shift in Britain's international position that withdrawing support for the US in Iraq implies. Nor did they spell out what an alternative UK foreign and defence policy would look like.

Again, in domestic policy, the Liberal Democrats are not as different from the other parties as they like to think. They, too, bow before the altar of neo-Thatcherism, and what they are offering is only a more upfront version of the mix of market forces and income redistribution that Labour has implemented by stealth.

Despite their efforts to manufacture divisions, all the main parties offered a continuation of the status quo - at a time when it is fast becoming unsustainable. This is nowhere clearer than in environmental policy. All the parties accepted the fact of climate change, and even Michael Howard said the Bush administration was wrong to deny the reality of humanly caused global warming. Yet no party grasped the scale and urgency of the environmental challenge. Mounting scientific evidence suggests climate change is happening faster than anticipated, and a large shift in the conditions under which we live is inescapable. This evidence does not come mainly from computer models, which some have dismissed as unreliable. It is based on observation of physical processes that are already under way, such as the melting of polar glaciers. Whatever so-called sceptical environmentalists may pretend, there is no serious scientific doubt about accelerating climate change.

At the same time that global warming is speeding up and becoming irreversible, "peak oil" - the point at which world oil production reaches a peak and begins to decline - may not be far away. Matthew Simmons, a veteran oil expert who has advised the Bush administration, even suggests in a forthcoming book - Twilight in the Desert: the coming Saudi oil shock and the world economy - that it has happened already in Saudi Arabia, the country that is supposed to have the largest reserves. If this is so, it poses a momentous challenge. The industrialised world continues to be critically dependent on oil, and renewable energy is nowhere near filling the gap created by depleting fossil fuels. Windfarms and solar power cannot maintain a world population of six billion humans, nor support the sixty million who live in the UK - let alone the higher populations that are predicted. Before the election, the Blair government was edging towards favouring nuclear power - an option that, along with James Lovelock, I have supported on environmental grounds for many years. But there has been nothing resembling a national debate on the subject, and all the parties - including the Greens - remain in denial about the magnitude of the challenges that lie ahead.

The denial of awkward facts is pervasive in British life, and is shown in the failure to address rising levels of debt. One of the paradoxes of Labour's embrace of neo-Thatcherite orthodoxy on the virtues of old-fashioned public finance is that it has gone hand in hand with the encouragement of a post-modern culture of reckless private borrowing. A considerable part of the general prosperity of the Blair era has been fuelled by credit-card debt and home-equity release, and a "live today, pay tomorrow" mentality has become deeply ingrained. For many people - including students paying their way through university - debt has become a necessity, but for many others it has become the means whereby a standard of living that cannot be justified in terms of earnings is kept going on the never-never.

This carpe diem philosophy has been reinforced by the collapse of pensions. Old-style final-salary schemes are dying out in the private sector, and - though the government fell silent on its plans to scale them back in the run-up to the election - they are under attack in the public sector as well. In these circumstances, planning for the future is a profitless exercise. Many people have decided simply not to bother about saving; they go on spending money they do not have, in the belief that ever-rising house prices or a resumption of inflation will bail them out of debts they cannot repay. For a large part of the population, avoiding thinking about the future is an integral part of their present quality of life.

J K Galbraith's vision of private affluence and public squalor is nowhere more fully realised than in Britain today, and a good case can be made that the debt-fuelled private consumption boom of the past eight years is an integral part of the political economy of new Labour. So long as personal spending power is high, the decaying social infrastructure can be forgotten and the squalor of public services shut out from conscious awareness. Britain's voters have not given up on government and are far from accepting the US model in which the state retreats from social provision. At the same time, they are unwilling to accept European levels of personal taxation. New Labour has found a way out of this conundrum by encouraging personal borrowing. Voters do not feel the pain of rising taxes so much when their living standards are buffered by debt, and the decision to adopt an American or a European model can be put off. Despite all the talk about hard choices, this is one - one of many - that has been postponed.

Not for ever, though. At some point the bills will have to be paid, and it may be sooner rather than later. Under the impact of the ruinous cost of the Iraq war, the US federal deficit is spiralling, and it is hard to see how it can be brought under control. The Bush administration would dearly love to bring back the troops, but it lacks an exit strategy. To pull out of Iraq in the near future would be to suffer a huge strategic defeat.

Just as bad, US withdrawal would leave Iraqi oil in limbo - and it is here that the analogy with the war in Vietnam breaks down. Despite the terrible suffering of those involved, the Vietnam war was peripheral in its impact on the rest of the world. During the long years the conflict dragged on it became horribly normal and, when the US finally pulled out, there was nothing like the feared domino effect in the region. In contrast, the US in Iraq can hardly afford to slog on with the war, but nor can it bring it to an end. This is an impasse that cannot last, and there is a risk it will be resolved by events - such as serious unrest in Saudi Arabia. That could shake the global economy to its foundations, triggering a collapse of the dollar and stagflation in America. The ability of the United States to continue with a ruinous war would be compromised. And Britain's feckless prosperity would come to a sudden end.

Whatever happens in the coming years, we can be sure Britain will be gloriously unprepared. It is fashionable to bemoan public estrangement from politics, but the election campaign showed that in one respect at least, the people and the political class are at one. Neither is ready to question the status quo and think how to face the future. As a result, crucial issues about Britain's future are likely to be determined by events that voters and politicians prefer not to think about.

John Gray's most recent book is Heresies: against progress and other illusions, published by Granta.

This article first appeared in the New Statesman. For the latest in current and cultural affairs subscribe to the New Statesman print edition.

John Gray is Professor of European Thought at the London School of Economics. Prior to his LSE appointment Gray was Professor of Politics at Oxford University and a fellow of Jesus College, Oxford. Gray has been an influential conservative thinker, working in the UK with the Institute of Economic Affairs and in the US with the Cato Institute, the Institute for Humane Studies, the Liberty Fund and the Social Philosophy and Policy Center. He was a key scholar — and ardent defender — of the work of Friedrich Hayek, in 1984 publishing the seminal Hayek on liberty. During the 1990s, Gray revised his views to question free trade, the laissez-faire market system and the Enlightenment project more generally. He is now better known for his criticism of the excesses of neoliberal ideology, and has published several books on the subject...

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